Cryptocurrency businesses increasingly turning to offshore bank accounts

A report concentrating on the cryptocurrency and blockchain markets in the UK has revealed many businesses are turning to offshore bank accounts. The research was carried out by Digital Capital in a report called ‘Blockchain in Action: State of the UK Market’. Findings show that companies in this sector are finding it difficult to open traditional bank accounts.

Offshore bank accounts for crypto-businesses

Digital Capital is a digital innovation centre based in the UK. Its report surveyed 264 cryptocurrency related or distributed ledger technology-based businesses, which are divided into four distinct groups.

The categories are decentralised applications developers (dApps), centralised systems including crypto exchanges, service providers like consultancies and VC firms, and distributed ledger companies.

74% of blockchain companies have working applications and products in various sectors. Around 71% of these businesses are reporting revenue generation.

Uncertainty regarding regulatory bodies

Most small businesses working in the crypto and blockchain space have expressed some concern relating to the regulatory environment in the UK. In the same way as many other countries, there is a lack of certainty surrounding this industry.

Almost 75% of those surveyed say that they are not happy with the uncertainty facing the industry. Many concerns centre on the lack of clarity from regulatory bodies and authorities. There is no real consensus on certification, industry standardisation or crypto regulations, which makes it a risky sector to work in.

Other concerns centre on the difficulty in accessing technical advice and expertise, business consultancy or legal help. Almost half of the companies surveyed say that they want more services, particularly with regard to specialist legal services for distributed ledger issues.

Worries over Initial Coin Offerings

SMEs also express concerns surrounding Initial Coin Offerings (ICOs). This way of raising funds has experienced a big surge since 2016, with thousands of companies and projects choosing it as one way to raise money.

The report shows that the UK is second only to the US in terms of the total number of ICOs launched. The UK stands at a 10% share, with the US at 20%. However, out of the 264 businesses surveyed, just 4.5% used an ICO. Instead, around 80% of start-up founders used their own funds to launch their crypto-focused and digital ledger focused companies.

Uncertainty surrounding regulation also affects the entire ICO market. The Financial Conduct Authority (FCA) in the UK is examining regulating the ICO space, but has yet to formulate a framework to cover the legalities.

Problems with opening bank accounts

A key finding from the report relates to the trouble crypto businesses have when they want to open a bank account. More than half of the firms asked say they found it problematic when trying to open a bank account with a legacy financial institution.

Again, this is due to the uncertainty in the sector, particularly when it comes to anti-money laundering (AML) and Know Your Customer (KYC) checks.

James Turner, Managing Director of Turner Little Limited says: “The difficulty accessing a bank account has meant that many businesses in the crypto and distributed ledger space are turning towards opening offshore bank accounts. This allows more freedom and an alternative to the legacy banks, which are unsure about this sector.

“Until there is definitive legislation from the Government and regulatory bodies, there will be more challenges for small business owners in this sector. However, despite this, there is no doubt that the blockchain technology industry has huge potential to completely transform many sectors across the UK.”

About Turner Little

Founded in 1998 in Yorkshire, UK, Turner Little is a specialist UK and offshore company formation, banking and corporate services provider. Our services include company formation, UK and offshore banking, asset protection, credit correction/repair, trademarking and trusts. Other services include Internet services, mail forwarding, wills and probate. Turner Little’s vision is to offer the best possible service, together with market leading products.

UK cracks down on offshore banking fraud

Since the end of January 2018, UK authorities have been able to use Unexplained Wealth Orders (UWO) to crack down on financial fraud. Incorporated into law as part of the Criminal Finances Act 2017, it’s a specific order issued by a British court to force someone to reveal the sources of their ‘unexplained wealth’. It’s part of a wider push by the Government to combat fraud within legacy and offshore banking.

Combating fraud in offshore banking fraud

The first UWO to be issued under s362A (1) has just been upheld in the High Court, after it was challenged by the respondent. The first UWO was for Mrs Zamira Hajiyeva, who was asked to explain her wealth. The 55year-old woman is married to a jailed banker who owns the Mill Ride Golf Club in Ascot and went to the High Court to try to keep her identity hidden. This was denied by the High Court.

The order demands a statement from the respondent to explain various aspects of their finances. First, they must set out the nature and extent of their interest in a property, explain how they obtained it, reveal whether it is held by trustees of a settlement and give any other information under the order. If the respondent doesn’t comply within a specific timeframe, then the property in questions is deemed recoverable. The order can only be issued by the Crown Prosecution Service, HM Revenue & Customs, the FCA or the National Crime Agency (NCA).

Offshore incorporated business

The property in the order was bought in 2009 by a company called Vicksburg Global Inc. The business was incorporated in the British Virgin Islands and bout the property for £11.5 million. Three years ago, the respondent told the Home Office in her application for ‘indefinite leave to remain’ that she is the beneficial owner of Vicksburg. This was later confirmed by the British Virgin Islands police.

Mr Hajiyeva is the respondent’s husband and was formerly the chairman of the International Bank of Azerbaijan. Between 2001 and 2015 when he resigned his position, he was on a salary of £54,000. Later in 2015, he was arrested and charged with abuse of office, large-scale fraud and embezzlement in connection with his former bank. In 2016, he was sentenced to 15 years in prison and forced to pay the bank about $39 million.

The NCA convinced the courts that both Mr Hajiyeva and his wife are PEPs (politically exposed persons). Under the European Union’s newest Money Laundering Directive, PEPs come under various categories, including supervisory bodies of enterprises owned by the state.

Respondent contested order

The respondent argued that the UWO shouldn’t apply on eight different grounds, including that her husband isn’t a PEP, and that the NCA misrepresented his role to the courts. However, Mr Justice Supperstone of the High Court rejected all of her arguments and said he was satisfied that the Bank of Azerbaijan is a “state-owned enterprise”.

This judgement led to the anonymity order surround Mrs Hajiyeva to lapse. The NCA further suspects that illegal cash funded the purchase of a property called Mill Ride, which was bought through an offshore company based in Guernsey. The Judge says that the respondent’s spending habits appeared to corroborate the fraud allegations against her husband. The court pointed to the £16.3 million that was spent by the defendant between 2006 and 2016 at Harrods in London.

The NCA has identified approximately £4.4 billion of suspicious money in the UK. It wants to use UWOs more rigorously to target potential sources and users of illegal money. The NCA’s Director of Economic Crime has said that he wants to target money-laundering through buying and selling of prime real estate in London. The overall aim is to reduce the appeal of the UK as the ideal destination for money laundering and fraud.

James Turner, Managing Director of Turner Little Limited says: “Although UWOs are a civil matter, only law enforcers can use these orders. It’s likely that they will become more common in the ongoing fight against financial fraud. At the moment, the proceeds of any unexplained wealth are confiscated in accordance with the Proceeds of Crime Act. It’s not clear, however, how law enforcement agencies will determine the origins of stolen money. It’s also not clear whether the agencies will be fighting to return the money to the victims.

“There is a fear that UWOs are too little, too late and that it will mean agencies respond more slowly to initial reports of fraud.

About Turner Little

Founded in 1998 in Yorkshire, UK, Turner Little is a specialist UK and offshore company formation, banking and corporate services provider. Our services include company formation, UK and offshore banking, asset protection, credit correction/repair, trademarking and trusts. Other services include Internet services, mail forwarding, wills and probate. Turner Little’s vision is to offer the best possible service, together with market leading products.

What Should You Consider When Opening an Off-Shore Account?

Despite often attracting “bad press”, establishing an off-shore bank account can provide you with the effective means to manage your assets particularly when you live, work or buy property abroad or routinely transfer money between international accounts or currencies. Turner Little outline the key considerations when opening an off-shore bank account.

Check your suitability

Before you do anything else, determine whether you are an appropriate candidate for off-shore banking. These financial facilities are not suitable for everyone, but they can prove very effective for some. You may benefit from an off-shore account, for instance, if you are an expat who has built up significant savings and investments. By opening an off-shore bank account, you can manage these assets efficiently while working in a foreign nation.

Choose your region careful

The key to off-shore banking is selecting the right region. Ensure you choose a stable region which has a history for providing first-rate financial services, so you can rest assured your assets will be managed appropriately. Look at the region’s regulatory system. By placing your funds in an off-shore region with strong financial regulation, you can ensure your capital is afforded robust legal protections.

Consider access to your funds

Do not open an off-shore bank account, without first determining how easily the account allows you access to your funds. This will ensure that you are able to manage your finances according to your circumstances. It is advisable to opt for off-shore account providers which supply comprehensive online banking services, as well as an around-the-clock telephones service which caters to international customers, so you can access your funds at your own convenience.

Think about language

Regional news outlet The National notes that language should also be key area of consideration when choosing an off-shore bank account. For instance, if your mother tongue is English, it would make sense to opt for a jurisdiction where this language is widely spoken. This is important in order to be able to communicate quickly and easily with those managing your assets, providing you with the ability to control your funds at your leisure.

Benefit from exchange rates

When selecting an off-shore bank account, it may be in your best interests to consider how you can benefit from currency exchange rates. Some providers offer accounts in more than one currency. Look for multi-currency arrangements so you do not miss out on exchange rates. For instance if you are paid in US dollars, by utilising this strategy you could deposit your funds into a British pound-based account and execute a currency exchange when the rate is in your favour.

Turner Little

We would suggest that you conduct extensive research before opening an off-shore bank account. Consider exchange rates, fund access facilities and regional regulation, to ensure you select the financial product most suited to your requirements. As registered bank intermediaries, Turner Little can provide advice on off-shore banking matters.

Turner Little was founded in 1998 and it has since become a well-established UK based professional Company Registration Agent, Registered Bank Intermediaries and Business Consultants, as well as Trust provider. You can receive our monthly newsletter by signing up using the form below.

Is an Offshore Account Right for You?

We’ve put together this guide to offshore accounts, to help you decide whether it’s something you should include in your financial planning.

You may have read about high profile celebrities ostensibly using offshore bank accounts to get out of paying tax, but it’s not that simple and that is not a reason to have an offshore account. You’re generally liable for tax on the interest earned on your savings in the same way as you would be in the UK. Here’s how they work.


What exactly is an offshore account?

Offshore bank accounts refer to savings accounts located in a country other than your country of residence. They allow customers to save money in varied currencies, and although you might think you need to be very wealthy to take advantage of the opportunity, that’s not the case.

Offshore accounts can be used to save dollars and euros, among other currencies. This can be useful if your salary isn’t paid in British pounds. You must be over 18 to open an account, and some are only available to people who live outside of the UK.

You’ll generally need to invest over £1000 to open an offshore account, but it is possible to find one that you can open for a lower initial amount. They’re offered by numerous banks and are based virtually anywhere in the world.


Should you open an offshore account?

 Whilst they’re not right for everyone, offshore accounts can be useful if you live or work abroad, or you travel regularly overseas. They can also be worthwhile if you are planning to retire to another country. If you can save in the same currency that you want to use to fund your retirement, then it can prevent you from losing out due to fluctuations of exchange rates.

Talking of exchange rates… some people use offshore accounts to ‘play’ rates and try to increase their savings by taking advantage of weak sterling. But this can backfire and lead them to lose out if they have to convert back at the wrong time.

Offshore accounts can have higher operating costs than you may be used to seeing in the UK, with some banks charging a cost per withdrawal, whilst others make a fixed monthly charge for operating an account.  At first glance, this makes them less attractive to people with small amounts of savings or those who want to be able to access their money frequently but if you are careful in the selection process, it should not be a bar to going offshore.

Tax implications of offshore accounts

It used to be the case that offshore savings accounts differed from standard savings accounts by paying interest without first deducting tax. However, since April 2016, both regular and offshore savings accounts do this.

This is due to the introduction of the Personal Savings Allowance. Basic rate taxpayers pay no tax on the first £1,000 in interest. Higher rate tax players don’t have to pay tax on the first £500. But, interest earned above these thresholds will incur tax. HMRC demands you declare savings interest on your self-assessment tax form and pay it later on. If you don’t, then you could face big fines.


Is money safe in offshore accounts?

The Financial Conduct Authority (FCA) protect authorised bank or building society savings accounts in the UK. The Financial Services Compensation Scheme automatically protects the first £85,000 that’s held with each financial institution.

Money held in offshore accounts within the EU is also protected to the equivalent sum in Euros as the UK guarantee scheme. Elsewhere you should check with the provider to see whether your money is protected through any kind of scheme. You may be surprised at the number of jurisdictions which now have some level of government backed guarantee scheme in place.

Turner Little’s guide to offshore savings accounts

Offshore savings accounts are familiar to most people through media reports of celebrity scandals involving tax avoidance. However, the reality is that offshore account holders do have to pay tax, but there are other benefits that make them a good option.

Contrary to popular opinion, you don’t have to be massively wealthy to take advantage of these benefits. We’ve put together a quick guide to offshore savings accounts.

What exactly is an offshore savings account?

Think savings accounts held outside of your country of residence. So, if you live in the UK and want to open an offshore account, it will be located in a different country. The accounts can be used to save euros, dollars and other currencies, which is particularly useful for people whose salary isn’t paid in sterling. Most offshore accounts can be opened by any adult over 18, although some are only available to people living outside of the UK.

Sometimes you’ll need a deposit of £5,000 or £10,000 pounds to open an offshore account, but others ask for a minimum deposit of just £1. They are offered by private banks as well as many high street banks and building societies, and most offshore accounts available to people in the UK are based on the Isle of Man or the Channel Islands.

Is an offshore account right for you?

They’re not for everyone, but they’re good for people who work or live abroad, hope to retire to another country or regularly travel outside of the UK. Being able to save in the currency you’re paid or that you plan to use to fund your retirement, protects you from fluctuations in exchange rates.

Some people use offshore accounts to boost their returns by converting cash back to pounds when sterling is weak, but you could obviously lose out if you change back to pounds when the exchange rate is poor.

Offshore accounts can be cheap to open but can have high operating charges so make sure you enquire about ongoing transaction fees.

Different types of offshore accounts

You can open an offshore account with variable or fixed interest rates. You’ll generally be offered introductory bonuses with variable rate accounts, and they tend to offer easy access to your money. Fixed rate accounts, on the other hand, usually require you to wave goodbye to your savings for a period between one and five years.

How to open an offshore account

As long as you meet the bank’s minimum requirements, it’s straight forward to open an offshore savings account. Apply online or in branch and supply ID or follow any other steps to verify your identity. Out of necessity, and to prevent offshore accounts being used for money laundering, tax evasion or other illegal acts, there are various checks in place.

You may be asked about the kinds of transactions in your account, or you could be asked to supply financial references from your UK bank. When you’ve passed these steps and your application is successful, you can make your first deposit and start using the account.

How does the tax work?

While offshore savings accounts used to pay interest without deducting the 20% tax that standard savings accounts did, this changed in April 2016. They both now pay interest without deducting tax.

The introduction of the Personal Savings Allowance means that basic rate taxpayers don’t have to pay anything on the first £1,000 worth of interest. Higher rate taxpayers don’t have to pay tax on the first £500 worth of interest. However, interest earned above these thresholds is taxable with offshore savings accounts.

Any interest you earn from your offshore account must be declared to HM Revenue and Customs (HMRC) as self-assessment. You will then pay tax on it when they come back to you with their calculation

It is possible for savers to cash in on the delay between earning the interest and paying tax, as the extra money stays into their account and boosts the interest earned.

Turner Little offers Offshore Personal and Corporate bank accounts, as well as credit card accounts.

About Turner Little

Founded in 1998 in Yorkshire, UK, Turner Little is a specialist UK and offshore company formation, banking and corporate services provider. Our services include company formation, UK and offshore banking, asset protection, credit correction/repair, trademarking and trusts. Other services include Internet services, mail forwarding, wills and probate. Turner Little’s vision is to offer the best possible service, together with market leading products.